Tracking DarkSide Ransomware Gang's Profits

Elliptic Says It Traced Payments by Colonial Pipeline and Many Others

CRIMINAL CAPITALI$M = PRIMITIVE ACCUMULATION OF CAPITAL

Doug Olenick  • May 18, 2021

Ransom payment amounts generated by DarkSide ransomware (Source: Elliptic)

The DarkSide ransomware gang apparently collected over $90 million in ransom payments from about 47 victims, including Colonial Pipeline Co., since the gang began operating in August 2020, according to the blockchain analytics firm Elliptic, which says it analyzed bitcoin wallet activity

Using the ransomware-as-a-service model, the DarkSide gang, which says it shut down operations as of May 13, provided malware to affiliates, who infect targeted computer systems and negotiate ransom payments. The DarkSide gang reportedly took a 25% share for ransoms less than $500,000, gradually decreasing to a 10% share for ransoms greater than $5 million, with the affiliates getting the remainder, writes Tom Robinson, Elliptic's co-founder and chief scientist, in a blog Tuesday.

"This split of the ransom payment is very clear to see on the blockchain, with the different shares going to separate Bitcoin wallets controlled by the affiliate and developer," Robinson writes. "In total, the DarkSide developer has received bitcoins worth $15.5 million (17%), with the remaining $74.7 million (83%) going to the various affiliates."

The DarkSide Operation

Elliptic says it identified 47 bitcoin wallets that made ransom payments to Darkside.

About 100 DarkSide attacks have been identified, so apparently almost 50% of the gang's attacks resulted in a ransom payment, with an average payment of $1.9 million, according to Elliptic's analysis.

Source: Elliptic

DarkSide's moneymaking empire started off slowly but peaked in February, when the group and its affiliates brought in just over $20 million, Elliptic says, based on its wallet research. Ransom payments totaled roughly $15 million in March, $8 million in April and $14 million in May, Elliptic reports.

Robinson says Elliptic, using proprietary blockchain analysis tools, tracked Colonial Pipeline paying DarkSide more than $5 million in two separate payments to a wallet on May 8 and May 10.

"May was set to be a record month, until DarkSide reportedly shut down its operations on May 13 and its bitcoin wallet was emptied," Robinson says.

In response to increased scrutiny from the cybersecurity industry and the federal government over the gang's attack on Colonial Pipeline Co., DarkSide announced it was abandoning its ransomware-as-a-service operation, issuing decryptor keys and making some financial restitution to its affiliates for lost business.

The cyber gang said it had lost contact with the infrastructure that enabled it to conduct ransomware operations and work with its affiliates (see: DarkSide Ransomware Gang Says It Has Shut Down).

On Tuesday, Brett Callow, threat analyst with Emsisoft, said DarkSide remained dark.
Colonial Pipeline's Payments

Elliptic says it determined that on May 8, 75 bitcoins, worth about $5 million at the time, were deposited by Colonial Pipeline into a DarkSide wallet, with another payment worth $320,000 added on May 10.

"Our analysis shows that the wallet has been active since 4th March 2021 and has received 57 payments from 21 different wallets. Some of these payments directly match ransoms known to have been paid to DarkSide by other victims, such as 78.29 BTC (worth $4.4 million) sent by chemical distribution company Brenntag on May 11," Robinson says.

Elliptic says it was able to zero in on the Colonial Pipeline payments because they originated from the currency exchange previously used by the pipeline company.

On May 9, the day after Colonial made its payment of 75 bitcoins, DarkSide removed a large portion of the bitcoin from its primary wallet, Elliptic says. The analytics company says that on May 13, the $5 million that remained in the wallet was removed by an unknown source.

"There has been speculation that the bitcoins were seized by the U.S. government," Robinson writes in a May 14 blog.

Money Laundering

"By tracing previous outflows from the wallet, we can gain insights into how DarkSide and its affiliates were laundering their previous proceeds," Robinson also writes. "What we find is that 18% of the bitcoin was sent to a small group of exchanges. This information will provide law enforcement with critical leads to identify the perpetrators of these attacks."

DarkSide sent another 4% of the money to a darknet money laundering marketplace named Hydra, which offers various criminal services, Elliptic says, based on its tracking.

"Hydra offers cash-out services alongside narcotics, hacking tools and fake IDs. These allow bitcoin to be converted into gift vouchers, prepaid debit cards, or cash rubles. If you're a Russian cybercriminal and you want to cash out your crypto, then Hydra is an attractive option," Robinson says.

Elliptic hopes that by identifying the bitcoin wallets used by DarkSide, fintech companies and crypto exchanges can be alerted to any client deposits that originate from a DarkSide wallet.

With this knowledge, "they can ensure that DarkSide and other ransomware operators cannot cash-out or exchange their bitcoin proceeds, disincentivizing this activity," Robinson says.

Dying Gasp Attack?

The day after DarkSide's May 13 declaration that it was shutting down, European subsidiaries of the Toshiba Tec Group confirmed they had been struck with a ransomware attack, Reuters reports. DarkSide was apparently responsible for this attack, based on research from the Japanese security firm Mitsui Bussan Secure Directions.

Toshiba says it immediately shut down communications between its European entities and Japan to stop the attack from spreading.

"As far as the investigation result shows, the group recognizes that it is possible that some information and data may have been leaked by the criminal gang. We will continue to conduct further investigation in cooperation with external specialized organization to grasp the details," the company said.

Toshiba has not released any additional information regarding the attack and has not responded to a request for additional information.

Data breach detection, prevention and notification - DataBreachToday

About the Author
Doug Olenick
News Editor, ISMG
Olenick has covered the cybersecurity and computer technology sectors for more than 25 years. Prior to joining ISMG as news editor, Olenick was online editor for SC Media, where he covered every aspect of the cybersecurity industry and managed the brand's online presence. Earlier, he worked at TWICE - This Week in Consumer Electronics - for 15 years. He also has contributed to Forbes.com, TheStreet and Mainstreet.

1. Marx's theory of primitive accumulation: a suggested ...

   https://libcom.org/library/marx-primitive-accumulation...

   2005-08-05 · If any sense is to be made, therefore, of the notion of a 'primitive accumulation' (in Marx's sense of the term) prior in time to the full flowering of capitalist production, this must be interpreted in the first place as an accumulation of capital claims - - of titles to existing assets which are accumulated primarily for speculative reasons; and secondly as accumulation in the …

How 'shrink' became the biggest story in retail

SHRINK IS NOT WHAT YOU THINK


Hamza Shaban
·Senior Reporter
Sat, August 26, 2023

Retail theft, or "shrink," as business executives put it, has run wild.

In waves of earnings calls, references to shrink resemble the retail industry's upside-down version of mentioning AI. But instead of generating hype, citing shrink softens the blow of sinking profits.

The most prominent mention of shrink in recent weeks came from Dick's Sporting Goods (DKS).

On a call with analysts following its Aug. 22 earnings report, CFO Navdeep Gupta said, "The biggest impact in terms of the surprise for Q2 primarily came from shrink." Gupta went on to say, "The number of incidents and the organized retail crime impact came in significantly higher than we anticipated." The company cut its full-year profit outlook in response.

The theme of missing merchandise also featured in recent calls from Dollar Tree (DLTR), Macy's (M), Home Depot (HD), and Target (TGT).

Dick's Sporting Goods profit slipped in its second quarter and missed Wall Street's expectations as the retailer cut its full-year profit outlook, citing worries over theft at its stores. (Seth Wenig/AP Photo, File)

Analysts say the trend reflects a real problem for retailers, and one that they are taking steps to prevent.

"Nobody wants to come out and say, 'We are not in control,'" said David Johnston, NRF vice president of asset protection and retail operations. "To see the number of CEOs coming out and talking about shrink and loss — it's an issue."

Dollar Tree, for instance, told investors it is installing locked cases on more items and even taking some SKUs out of stores in response to elevated theft. "We are now taking a very defensive approach to shrink," Dollar Tree CEO Rick Dreiling told analysts this week.

And as executives continue to hammer on the industry-wide threat coming from shrink, the concept has gathered momentum and can work as a crutch for explaining weaker financial performance.

"There is a bandwagon effect here," said Neil Saunders, a retail analyst at GlobalData. "When one retailer starts to call something out, others will look at it. And because everyone is interested in it, that fuels more mentions of theft."

Growing 'shrink'

But data suggests that behind a new industry-wide excuse for business slowing down is an uptick in theft and increasing concerns for safety.

Retailers say that shrink amounted to $94.5 billion in 2021, according to the National Retail Federation’s (NRF) annual of survey of companies, up from $90.8 billion in 2020. As a percentage of sales, however, that figure came out to about 1.4% of sales, down from 1.6% in 2020.

Retailers also reported a 26.5% increase in organized retail crime incidents, when groups of professional shoplifters steal and resell stolen goods. While the latest figures are nearly two years old, sustained commentary from executives suggests that shrink is a growing problem for them,.

Jonathan Simon, a criminal justice professor at UC Berkeley School of Law, said businesses probably do have relatively accurate estimates of how much their inventory is shrinking due to theft. And that it's possible retail theft has increased partially because of online resale platforms, which serve as a conduit for organized theft for profit.

"But businesses also have an incentive to place more emphasis on theft as it shifts the responsibility for business shrinkage — never a good look to investors or customers — to an abstract but blameworthy factor like organized crime," he said.

The public also has a tendency to place all retail theft in the same category, he added, lumping together organized theft, survival theft by unhoused or very poor people, and teenagers and younger adults acting out by stealing. "Each of these really needs to be seen as distinct problems with distinct solutions."

A Nordstrom department store at the Grove mall in Los Angeles, where a smash-and-grab robbery drew attention to organized retails thefts. 

(Jae C. Hong/AP Photo, File)

Beyond the 'smash and grab'

The dramatic crime figures and sensationalized videos that have drawn broader public attention have also invited criticism that the problem might be overblown.

In a widely covered backtrack, Walgreens CFO James Kehoe said earlier this year that the pharmacy chain "cried too much" about theft on a prior earnings call that was among the first to ignite concerns about retail crime.

But retail industry experts insist this quarter's references to shrink aren't merely executives crying wolf.

Janine Stichter, a research analyst covering consumer retail and lifestyle platforms at BTIG, said citing shrink figures isn't something that you can fake for very long.

Stichter sees the timing of shrink's big moment in earnings calls, which picked up at the end of last year, as coinciding with price increases and a weaker economic environment, highlighting a link between crime and a tougher economy.

Under the strain of higher costs, consumers squeezed by inflation, and shifts in shopping habits, the industry faces a host of challenges even without the pain and risks of theft.

"Shrink is clearly an issue, but so is the tremendous volatility that the consumer and retail has experienced over the last nearly four years," said Ethan Chernofsky, senior vice president of marketing at Placer.ai, a location analytics firm.

"The pandemic presented a unique set of circumstances and just when we expected a period of normalcy as the pandemic's effects faded, a wide array of economic challenges disrupted retail 'normalcy.'"

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.

Indeed.com

https://www.indeed.com/career-advice/career-development/shrinkage-retail

Shrinkage in Retail: What It Is and How To Prevent It | Inde... 

Feb 3, 2023 ... Retail shrinkage refers to loss of product from causes other than sales. Whether it is from theft, accounting errors or broken items, ...

Nytimes.com

https://www.nytimes.com/interactive/2023/06/02/business/what-is-retail-shrink.html

What's Behind All This 'Shrink'? - The New York ... 

Jun 2, 2023 ... Rather, shrink is the retail industry's term for lost inventory — items that left a store or warehouse without being paid for. The merchandise ...

Cnbc.com

https://www.cnbc.com/2023/05/31/what-are-retail-shrink-and-organized-retail-crime.html

What are retail shrink and organized retail crime? - CNBC 

May 31, 2023 ... Retail shrink refers to the loss of inventory from a variety of factors, including employee theft, shoplifting, administrative or cashier ...

Monthlyreview.org

https://monthlyreview.org/2023/04/01/the-meaning-of-so-called-primitive-accumulation

The Meaning of 'So-Called Primitive Accumulation' - ... 

Apr 1, 2023 ... That is why he preceded the words “primitive accumulation” by “so-called.” Marx's preference for “original expropriation” was not just playing ...

Marxists.org

https://www.marxists.org/archive/marx/works/1867-c1/ch26.htm

Chapter Twenty-Six: The Secret of Primitive Accumulation 

This primitive accumulation plays in Political Economy about the same part as original sin in theology. Adam bit the apple, and thereupon sin fell on the human ...

India Is Now A Capitalist State

India world leader in greasing palms: India doesn't just have loads of corruption at home, it is also the world leader in exporting graft. Months after Transparency International ranked India as among the more corrupt societies in the world, the NGO’s Bribe Payer's Index 2006 shows that Indian exporters are more willing than their counterparts from other countries to pay overseas bribes to secure business, clinch contracts, do deals and generally get on in the world. While this is the third BPI released by Transparency, after the ones in 1999 and 2002, it is the first time India has featured in the index. It was considered too economically insignificant and lacking global spread and reach in the earlier rounds.

And who does India do export business with?

The US, India's biggest market accounting for 17% of India's total exports, the UAE, the second largest trade destination for Indian exports with an 8.5% share.

So who benefits from bribery? Look at which American companies have invested in India recently. And which Indian companies have been dominant players in global corporate takeovers.

US warns India of investment fallout from Coca-Cola, PepsiCo row

Gulf Arabs to pour billions into India real estate

Of course the UAE also has it's own corruption scandals in particular in Dubai, which has a Canadian connection.

India has a long history of corruption encouraged by British Imperialisms use of the Dutch East India Company for their own primitive accumulation of capital.

All capitalism is based upon the primitive accumulation of capital, that is the criminal acquisiton of wealth in its earliest period of development.

Democracy is less important to captialist development than corporate crime resulting from a capitalist state that allows for private accumulation through state policies of deregulation. See my article; Neo Liberal State Capitalism In Asia

Asia outsourcing: China, India and Southeast Asia as sourcing partners

The irony of these issues of transparency is that the it is based on WTO member capitalist states and their corporations that rate the countries invovled. You know corporations like Enron, Comcast, Apple, etc. all whom have been involved in some form of corporate malfiescence in their own countries. Kettle, pot, black.

See:

India

Mittal

Corporate Crime


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India, bribery, corruption, capitalism, outsourcing, primitive-accumulation-of-capital, marx, neo-lieberalism, TransparencyInternational, BPI, transperancy, corporate-crime, white-collar-crime, internationa-trade, trade

The Spectacle of War on Terror

An excellent article in New Left Review, available online, is a review of NLR's Verso publication Afflicted Powers Capital and Spectacle in a New Age of War
by the Retort Collective based in the Bay Area of San Fransisco.

A collective effort they use Situationist theory of the Spectacle to analyze the current Bush phony war on Terror.

In light of the Pentagon release of Al-Qaeda materials this weekend that show Osama bin Laden understood the importance of media imaging of his war on the U.S. especially the attack on 9/11. It was the unreal reality of TV imaging, that then created the market response of 'reality' TV.

Retorts analysis of this as a Spectacular War, a media war fought in images and through media including the internet, becomes important for the Anti-War movement and the Left to understand.

They also use the theory that the permanent war economy that the US has embraced is a form of primitive accumulation of capital, which is also discussed in an earlier article in NLR.

It is this analysis that I have also posited here, that capitalism as globalization still requires primitive accumulation of capital, war zones with the consequential piracy and brigandism that marks the earliest form of capital accumulation.

Julian Stallabrass: Spectacle and Terror

The central claim of the book is that, with the attacks of 9-11, the us state was wounded at the level of the spectacle and cannot endure this ‘image death’ or ‘image defeat.

The perpetrators were fully conscious of what they were about, were in fact Debordian in their thinking, reasoning that capitalism is dependent on the colonized social circuits that comprise spectacle—including confidence in the market and the state, and an identification with commodity culture—and that to disrupt spectacle may have great and unpredictable consequences. The attacks, Retort claim, were not atavistic pinpricks but modern politics, an assault above all on the ‘ghost sociality’ purveyed by the media The assault on spectacle, not on economic power or even people, was their main business, and in this sense they were for a short time remarkably successful.

There is much that can be said to qualify this view. The motivations of the bombers themselves may never be known, although Retort point to tracts on media theory found in Al Qaeda camps. They must indeed have known that the consequences of their acts could not have been accurately predicted, and this makes their political motives—as opposed to their religious ones, or the desire for just revenge—murkier still. Retort are correct that the void at the level of the image in the mainstream broadcast media was remarkable

In any case, it may be that the point of terror is not merely to disrupt spectacle by producing indigestible images, but to exceed it. Retort highlight the paradox of the vanguard Islamic revolutionaries, who deny themselves all that capitalist spectacle has to offer, and harden themselves against mundane sentiment and appetite, yet who still hold to the effectiveness of the image, and propagate images of their acts through websites. Just as in their lives and deaths they seek the unmediated, so their atrocities perform it, being designed to produce real, bodily fear (not the sublime of air shows), to blanket a city with the smell of fire and blood, to bring to a people sunk in spectacle the ineluctability of arbitrary death. The July 2005 London underground bombings were not meant primarily to create images, but to spread the terror of living burial among the cityÂ’s populace.

Retort argue that the result of the spectacular defeat of 9-11 has been to push the state into actions that are as much governed by spectacle as by material considerations. Warfare has been elevated from an intermittent action to permanent imperial conflict. They claim that one frequently repeated charge of the anti-war movement—that the war was fought for oil—when taken too simply, ignores the ‘partially non-factual imperatives of capital accumulation. These include the effort to repair spectacle, and the drive to normalize war in the minds of citizens.

Retort are surely correct to point to the state’s efforts to create images that can counter the memory of 9-11, and to their insufficiency: Bush on the flight-deck proclaiming victory in Iraq, Saddam’s statue toppled, the dictator captured, the SmokinÂ’ Marine who was supposed to embody the cool courage of the us armed forces, and so on. It is not that these were ineffective pieces of propaganda, but they have subsequently soured as the war and acts of terror have continued. The most memorable images so far gathered by the us armed forces in Iraq are those taken on the phone-cameras of the torturers of Abu Ghraib. Similarly, us political support for Israel is seen as no longer being driven by strategic or military considerations, which now would operate against such an alliance, but rather as an attachment at the level of the image: both are simultaneously democratic consumer societies and highly militarized states with a pioneer ethos, and both harbour the guilt and pride of having taken their land by expelling and exterminating another population. The us in seeing Israel looks into a mirror and cannot abandon its own reflected image.

Find blog posts, photos, events and more off-site about:
NLR, Retort, Osama, bin, Laden, Al-Qaeda, Spectacle, Debord, Situationist, War, Bush, 9/11, Iraq, Afghanistan, Terrorism,

Free Book Online: Rosa Luxemburg and South Africa

Newly released online as a PDF



Capitalist accumulation as a whole, as an actual historical process,
has two different aspects. One concerns the commodity market
and the place where surplus value is produced – the factory,
the mine, the agricultural estate… The other aspect of the
accumulation of capital concerns the relations between capitalism
and the non-capitalist modes of production which start making
their appearance on the international stage. Its predominant
methods are colonial policy, an international loan system – a policy
of spheres of interest – and war. Force, fraud, oppression, looting
are openly displayed without any attempt at concealment…
Rosa Luxemburg, The Accumulation of Capital, p. 432.

Capital now devours human beings: it becomes a cannibal. Every
human activity must now become capital and bear interest, so
that investment-seeking capital can live: schools, kindergartens,
universities, health systems, energy utilities, roads, railways, the
post office, telecommunications and other means of communication,
etc. The anarcho-capitalist dreams go even further. Even the police
and legislation are to be transformed into capital investments. One
receives a licence to live and to participate in any of the spheres
of society only if one pays to capital the fees required in the form
of interest. Capital becomes a ‘superworld’ to which sacrificial
victims must be brought.
Ulrich Duchrow and Franz Hinkelammert,
Property for people, not for profit, p.148.

These two citations present in a nutshell the basic traits of capitalist
accumulation from its origins to its current forms – the dominance of the
capitalist forms in the arena of material production, the continuous use
of coercion, violence and theft in order to increase the rate of profit, as
well as the intrinsic tendency of capitalism to subjugate all aspects of
social life to the reign of profit.

The 3rd Rosa Luxemburg Political Education Seminar, jointly
organised by the Centre of Civil Society at the University of KwaZulu-
Natal in Durban and the Southern African Regional Office of the Rosa
Luxemburg Foundation in Johannesburg, was held on March 2nd – 4th
2006 in Durban. The Seminar examined these general characteristics of
capitalist accumulation within the global, regional and local context.
That context is shaped, on the one hand, by the growing impact of
a corporate driven globalisation, but also the expansion of South African
capital into neighbouring countries, the emergence of new forms of
‘primitive accumulation’ under the label of Black Economic Empowerment,
and the ongoing commodification and privatisation of public services.
On the other hand, there is a growing movement which not only
resists the commercialisation of all sphere of human life but strives to
build alternatives – to create ‘another world’ which is not only possible
but necessary.

The success of the Seminar is due to many contributors. Very
valuable inputs were made by overseas guests including Elmar Altvater,
Nicola Bullard, Massimo De Angelis, Ulrich Duchrow and Gill Hart.
Other crucial interventions came from scholar-activists from the region
including Jeff Guy, Ntwala Mwilima, Prishani Naidoo and Greg Ruiters.
But this alone would not have been enough to make the seminar the
thrilling event it was. The other factor was vibrant interaction from the
floor. Contributions by activists from townships and social movements
– and the often forgotten inconspicuous work of the staff members of the
organising institutions – created an atmosphere of rigorous debate and
mutual encouragement.

This book contains some of the contributions to the 3rd Rosa
Luxemburg Political Education Seminar. The materials gathered here
will hopefully provide a valuable source of inspiration for activists and
will encourage them to extend their studies on other important writings
which form part of our huge theoretical heritage. However, these texts
can never fully reflect the lively spirit of interaction and solidarity that
prevailed throughout the event. To experience this unique feeling it was
essential to be there.

See:

Marxism

Imperialism

Africa

State Capitalism in the USSR

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South Africa, Rosa Luxemburg, Marxism, capitalism, Imperialism, PDF, free book online

War and the Market State

A tip o' the blog to bradspangler.com for drawing my attention to these articles.

Which led to inadvertent connections between two articles. Because again in the syncronistic universe that is the WWW, I was looking for his link to this, Counter-Economics: review of excellent book on smuggling and came across another article, which describes the actual nature of what folks mistakenly call globalization.

The creation of the new market states is the result of NAFTA, the EU, and other new evolving models of contractual corporate and state cooperation. They are the WTO, APEC , etcagreements and meetings that are occuring that have set in motion the evolution of the market state that Bobbitt speaks of below.

The War in the Balkans followed by the war in Afghanistan followed by the war in Iraq is not just the war of Empire and Imperialism but of private armies and private contractors, becoming in effect a state, since they provide privatized functions of the state as I have blogged about.See; War! What's it Good For? Profit

The attack on the Balkans was an attempt to end the last vestiges of State Capitalism and pound the Serbians into submissive acceptance of the privatization of the State through strategic bombing of industries.

It is the same with Iraq. It too was the last state capitalist country in the Middle East that had to be privatized. The other countries were less vulnerable since they are hierarchical societies that had opened their markets to capitalism, while remaining fuedalistic social constructs.

An interesting analysis of this concept of the War of the Market State can be found at Global Guerrillas which reviews this book;

The Shield of Achilles: War, Peace, and the Course of History

by Philip Bobbitt

" A new form of the State — the market state – is emerging from this relationship in much the same way that earlier forms since the 15th century have emerged, as a consequence of the sixth great epochal war in modern history.

The “market-state” is the latest constitutional order, one that is just emerging in a struggle for primacy with the dominant constitutional order of the 20th century, the nation-state. Whereas the nation-state based its legitimacy on a promise to better the material well-being of the nation, the market-state promises to maximize the opportunity of each individual citizen. The current conflict is one of several possible wars of the market-states as they seek to open up societies to trade in commerce, ideas, and immigration which excite hostility in those groups that want to use law to enforce religious or ethnic orthodoxy.

A state that privatizes most of its functions will inevitably defend itself by employing its own people as mercenaries-with equally profound strategic consequences. "

So if the exisiting nation states are using private armies, and further privatization due to the transformation of these new models of transnational corporate/state agreements creates the historic conditions for the development of market states then the current conflict called the War on Terror is a conflict between the black market states, such as Bin Laden Inc. against 'legitimate' transnational corporate states like Halliburton USA Inc.

In fact all of the current 'Stan states (Afghanistan, Kyhrigistan, etc.) which were once colonial outposts of the Soviet Union and were not fully developed state capitalist economies are now home to much of the black market. And while they are dictatorships still, they are ones that capitalism finds friendly, and able to do business with. But within these states exists another state, that is international in scope and is linked with organized crime, international intelligence agencies, terrorist networks, drug smugglers. etc. etc.

The way these black market states are funded is through what Libertarians call counter economics. Piracy by any other name. The very origins of the primitive accumulation of capital under fuedalism that gave rise to banking, trade and eventually full blown capitalism.

The Necessity of Gangster Capitalism: Primitive Accumulation in Russia and China

It is useful at this point to quote from the book review of Illicit from Global Guerrillas

Moises Naim, the editor of Foreign Policy Magazine, has an excellent new book called Illicit on the rise of global smuggling networks. It's a must read.

Globalization Melts the Map

Moises copiously documents how globalization and rampant interconnectivity has led to the rise of vast global smuggling networks. These networks live in the space between states. They are simultaneously everywhere and nowhere at the same time. He shows how these networks make money through an arbitrage of the differences between the legal systems (and a desire to prosecute) of our isolated islands of sovereignty. He also shows how their flagrant use of corruption can enable them to completely take over sections of otherwise functional states.

By all accounts the amount of money involved is immense. In aggregate, the networks that form this parallel "black" global supply chain, have a "GDP" of $1-3 trillion (some estimates are as high as 10% of the world's economy) and are growing seven times faster than legal trade. These networks supply the huge demand for:

• Drugs (both recreational and pharmaceutical).
• Undocumented workers (for corporations, home services, and the sex trade).
• Weapons (from small arms to RPGs, many come from cold war arsenals).
• Rip-offs of intellectual property (from digital content to brand named consumer goods).
• Laundered and unregulated financial flows.

This supply chain isn't run by the vertically integrated cartels and mafias of the last century (those hierarchies are too vulnerable, slow, and unresponsive to be competitive in the current environment). The new undifferentiated structures are highly decentralized, horizontal, and fluid. They specialize in cross border movement and therefore can handle all types of smuggling simultaneously. They are also very reliant on modern technologies to rapidly transport and coordinate their global operations.

I would also reccomend Robert Naylors Hot Money, though dated, from the 1970's, it was one of the first to talk about International Finance and the black market and its impact on the bank meltdowns like BCIC and the connection of the banking industry to the black markets and their involvement in the debt crisis in the developing world. It was published by Black Rose books. A new edition is out as well he has written another work along similar lines, critiquing international relations, crime and hot money, entitled the Wages of Crime.

Thus the War on Terror is a war on two fronts. One to smash and transform the last outposts of state capitalism in Europe and the Middle East, and a war on the unregulated market.

Global Guerrillas says; The similarity between these commercial networks and those of modern terrorism (my global guerrillas) is not incidental.

Nor is it incidental that the American Empire is sowing the seeds of its own self destruction, not only in expensive military operations that rack up thousands of corpses and trillions in deficits, but in the fact that like the British Empire before it in order to finance these wars, it too relies on the black market. The British Empire set itself up for decline as it persued its Opium Wars against China. The US set itself up in the 1980's providing stinger missles to the Mujahadin in Afghanistan who paid for them in opium money. Who transported them through smuggling routes, still with us today used by Bin Laden Inc.

And quoting Bobitt again;
The current conflict is one of several possible wars of the market-states as they seek to open up societies to trade in commerce, ideas, and immigration which excite hostility in those groups that want to use law to enforce religious or ethnic orthodoxy. States make war, not brigands; and the Al Qaeda network is a sort of virtual state, with a consistent source of finance, a recognized hierarchy of officials, foreign alliances, an army, published laws, even a rudimentary welfare system. It has declared war on the U.S. for much the same reason that Japan did in 1941: because we appear to frustrate its ambitions to regional hegemony.

Capitalism has outgrown the Nation State. It reguired it for its period of ascendency. Now that it is the real domination of everything , of all social relations it needs a new state, a market state. One that can continually destroy its overproductive capacities. As capitalism evolves better technonological production, increases productivity and reduces the need for real labour, it amasses capital, which becomes unproductive. It is here that the new market state can use this capital to create permanent war, small scale localized war, that does not threaten its global expansion, but allows it areas for wide scale destruction of productive capabilities to offset its cancerous growth.

If war is privatized and all state functions are privatized, then the individual is no longer identified as a citizen, or as a wage labourer, but as 'free' individual, a contractor in a market state. Capitalism will have evolved to its logical conlusion; that we remain wage slaves but no longer to a particular boss or business but to the market. Our alientation will be complete. And it will be a society of barbarism, of all against all.

Labour 'is and remains the presupposition' of capital (Marx, 1973, p. 399). Capital cannot liberate itself from labour; it depends on the imposition of necessary labour, the constituent side of surplus labour, upon the world's working classes. It has to posit necessary labour at the same time as which it has to reduce necessary labour to the utmost in order to increase surplus value. This reduction develops labour's productive power and, at the same time, the real possibility of the realm of freedom.

The circumstance that less and less socially necessary labour time is required to produce, for want of a better expression, the necessities of life, limits the realm of necessity and so allows the blossoming of what Marx characterised as the realm of freedom. Within capitalist society, this contradiction can be contained only through force (Gewalt), including not only the destruction of productive capacities, unemployment, worsening conditions, and widespread poverty, but also the destruction of human life through war, ecological disaster, famine, the burning of land, poisoning of water, devastation of communities, the production of babies for profit, the usage of the human body as a commodity to be exchange or operated on, the industrialisation of human production through cloning etc.

The existence of Man as a degraded, exploited, debased, forsaken and enslaved being, indicates that capitalist production is not production for humans - it is production through humans. In other words, the value form represents not just an abstraction from the real social individual. It is an abstraction that is 'true in practice' (cf. Marx, 1973, p. 105). The universal reduction of all specific human social practice to the one, some abstract form of labour, from the battlefield to the cloning laboratory, indicates that the separation which began with primitive accumulation appears now in the biotechnical determination to expropriate human beings. Capitalism has gone a long way. Indifferent to life, it 'was satisfied with nothing more than appropriating an excessive number of working hours' (Dalla Costa, 1995a, p. 21). It is now engaged in the production of human-workers.

The Permanence of Primitive Accumulation: Notes on Social Constitution

Deconstructing Hayek

I came across this article on the web by Sean Johnson Andrews critical of the Regulation School of Economics that also handily dismisses the Austrian School of Economics so favored by Neo-Conservatives and Right Wing Libertarians.

[Author’s aside: I found it while researching material for Libertarian Anti-Imperialism, ah the joys of research based writing, it takes you off in all directions at once. And serendipitous synergies occur as happened in this case.[1] ]

Andrews study is about cultural production under capitalism, especially media concentration, and the whole article is an excellent read as are his other writings ( I have included a link to his article on blog freedom as a comment to my Blog Freedom or Cyberwar). He asks if bourgeois political economy which wants be taken seriously as a science but what kind of science and what kind of economics? He does an excellent job challenging the neo-classical school of the economics including its most radical wing the Austrian School of Economics from a libertarian dialectical position.

I have excerpted some of his critique from this long article, the whole of which is well worth the read. I have excerpted a small section of his very long article dealing with neo-classical economics of the Austrian and Chicago Schools of Economics as well as the new Regulation School of Economics.

Excerpts From: A Conversation among Bourdieu, Regulationist Economics and Cultural Studies and the way they can help objectify this and other conjunctures

The Science of Culture and the Culture of Science:

From Culture and Political Economy (Spring 2003)

Sean Johnson Andrews

Sean Johnson Andrews Blog on Media

Where, if anywhere, ideology leaves off and science begins has been the Sphinx’s Riddle of much of modern sociological thought and the ruthless weapon of its enemies. Clifford Geertz, The Interpretation of Cultures, 1973

At the present time, scientific effort mirrors an economy filled with contradictions. The economy is in large measure dominated by monopolies, and yet on the world scale it is disorganized and chaotic, richer than ever yet unable to eliminate human wretchedness. Science, too, shows a double contradiction. Max Horkheimer, “Notes on Science and the Crisis,” c.1930

The] neoclassical consensus succeeded in replacing the labor theory of value with one grounded in subjective utility and placed the ideas of ‘marginal product’ and ‘final demand’ at the center while elbowing into the wings the concepts of total demand. With these new ideas [. . .] the economy came to be thought of less in terms of material production and reproduction and more as a logic of human action. (79)

To make matters worse, this is the model of economics that is most strongly believed as rational and verifiable by a great many capitalist subjects.

The same social alchemy is true of economic capital and, like the capital in the scientific field, capital in the economic or symbolic field, legitimated by a hierarchy of producers, is more than just a mode of exchange: it is also a mode of domination.

Regulationist economics is concerned with “the study of the transformation of social relations as it creates new forms that are organized into structures and themselves reproduce a determinant structure, the mode of production”(16). This characterization of the economy seems similar to the Polanyian idea of embeddedness, which he describe in detail in The Great Transformation. In short, embeddedness is a way of giving primacy to one social formation over another. Polanyi insists that before the development of modern market capitalism in the 19th century, “the human economy was always embedded in society”(xxiii) and, more importantly,

The idea of a [disembedded] self-adjusting market implied a stark utopia. Such an institution could not exist for any time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. (3-4)

This is understanding of the relations between the economy, society and the state is, indeed, similar to the Regulationist view, but they tend to posit the agency with the market instead of with society. The concept of a Regime of Accumulation, central to the school, is not concerned with the effect of capitalism on society per se, but rather on the way that society can be best transformed to accommodate capitalism. It could be said that, in relation to Polanyi, they recognize that there are times when the relation between the two is unique. The concepts of a the predominantly extensive and intensive regimes of accumulation indicate this understanding. The former is the regime of accumulation which Polanyi might call “disembedded;” it is “that in which relative surplus value is obtained by transforming the organization of labor; the traditional way of life may persist or be destroyed, but it is not radically recomposed by the logic of utilitarian funcitonalism”(Aglietta, 71). This is the type of accumulation regime, according to Aglietta, which existed in late nineteenth-century America.

The crisis of worldwide depression and the rise of fascism that ensued when this accumulation regime could no longer continue is what Polanyi has witnessed when he says, in 1944, “nineteenth-century civilization has collapsed.” But whereas Polanyi thinks this is primarily the social result of an economic phenomenon, Aglietta describes it as a social phenomenon with economic consequences: “The Great Depression [. . .] was a major crisis of accumulation because the transformation of the labor process itself set up obstacles to valorization. What was at stake in the crisis was the transformation of the conditions of existence on the working class”(95).

What this understanding of capitalism points to is the “progressive, historical role of capitalism”(Lenin, 47) which Aglietta describes as only being fully possible in an intensive regime of accumulation, or some other “set of mechanisms for social mediation that guide the accumulation of capital in the direction of social progress”(Aglietta, 412). The description of he gives of this concept is important because it points to the place where Bourdieu’s understanding of habitus becomes relevant to the Regulationist description of capitalism:

The predominantly intensive regime of accumulation creates a new mode of life for the wage-earning class by establishing a logic that operates on the totality of time and space occupied or traversed by its individuals in daily life. A social consumption norm is formed, which no longer depends in any way on communal life [. . . .] This norm is stratified according to principles that closely correspond to the stratification of social groups within the wage-earning class. The intensive regime of accumulation accomplishes an integration of the two departments of production that makes possible a far more regular pace of accumulation and a far more rapid increase in the rate of surplus value.(71)

Packed into this quote are several ideas that become more fully articulated concepts in the hands of later Regulationist theorists. So, the “mode of life” which Aglietta mentions above, becomes a mode of regulation and the “logic that operates on the totality of time and space” is similar to Alain Lipietz’s description of a schema of reproduction (32-33).

Aglietta describes the major problem of capitalism in terms that are similar to Althusser and the conception of “capital” as quite similar to eponymous idea in Bourdieu: “we conceive of capital not as an eminent entity but as the development of the wage relation. Every major crisis of accumulation is a crisis of the present conditions of reproduction of this relation”(Aglietta, 169). The idea of a “schema reproduction” is something which is meant to stem this crisis in the production relation or the “reproduction of the material conditions of production”(Althusser, Lenin, 127). The schema of reproduction accounts for the relationship of labor, the relationship between departments of production, and the patterns of distribution and consumption which all together form “the skeleton of a regime of accumulation or a mathematical diagram of its social coherence”(Lipietz, 32). This system of relations is not necessarily planned or settled upon before it is implemented, it is just the schema that was “found” to work. And the schema works in so far as there is a “mode of regulation” that is appropriate: “If any schema is to be realized and to reproduce itself for any length of time, there must be institutional forms, procedures and habits which either coerce or persuade private agents to conform to its schemas”(33). Thus the “mode of regulation” is almost identical to the habitus.

In relation to Bourdieu’s capital, which again, Aglietta describes as a development of the relation, capitalism can be conceived in terms of a certain formalization of an economic field. However, there is a highly stratified relation between the people able to accumulate capital and the people who only serve as, what could be called, relational support, for their accumulation. Workers, whose laboring capacity may reward them with symbolic capital within the field of economic relations, are not typically able to accumulate enough of the economic capital (which their work valorizes) to change their position in the field. Thus there has to be a strong relation of domination within the field which encourages a disposition for the worker to continue to play this relational support role when it is clearly more in the interest of the capitalist for him to do so.

For unlike other, more settled sciences, economics has had a difficult history in convincing other practitioners from other sciences that it has the same sort of quantitative verifiability of mathematics or physics. Its status as a social science makes its seem less authoritative among other scientists. On the other hand, its status as a social science having to do with the basic relations of humankind gives its authoritative practitioners a great deal of symbolic capital, even as many of them attempt to disconnect their theories from the messy assemblages of power and production that they are supposed to describe. Friedrich Hayek, whose most famous book Road to Serfdom, was published the same year as Polanyi’s The Great Transformation, went to far as to suggest that the term “society” should be stricken from “our poisoned language” (Hayek, 112-115), making a point of not using the term to describe “our extended moral order” lest he be branded a socialist.

This dimension of the authoritative position of economics is evident enough in common parlance. Nevertheless, an example of an attempt to move outside of the scientific field to accumulate symbolic capital is visible on George Mason University’s home page in iterations such as “Welcome Nobel Laureate Vernon Smith.” As Yves Gringas points out in a short article about the “Nobel prize by association,” she traces a particularly clear case of “social alchemy:” “this so-called ‘Nobel prize’ is an extraordinary case study in the successful transformation of economic capital into symbolic capital, a transformation which greatly inflates the symbolic power of the discipline of Economics in the public mind.”

In 1968, the Bank of Sweden, interested in conferring a greater legitimacy on the discipline of economics, decided to offer a prize to the most innovative and important thinkers in the field and to dedicate it to Alfred Nobel, which was strange since he wasn’t an economist. However, the organizers in charge of the creation of the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel “ had its their own reasons for choosing Nobel. As Gringas tells it:

First, despite the skepticism of some scientists towards the ‘scientificity’ of economics, the Bank managed to convince the Royal Swedish Academy of Sciences and the Nobel Foundation to administer their prize. Secondly, identical procedures for the selection and nomination of the prize were chosen to those of the real Nobel prizes. Of course, the prize money would come from the Bank of Sweden, not the Nobel Foundation, but all the rest would be done exactly as if it was in fact a Nobel prize, up to and including the ceremony of 10 December.

Furthermore, since the full name of the prize is too onerous for people (especially journalists) to say, it became common parlance to call the prize “The Nobel Prize in Economics.” This work of social alchemy meant to solve the problem of the “primitive accumulation of symbolic capital”(Gringas) regarding this prize and its related field.

Of course not everyone has been happy about this. In 1974, when Gunnar Myrdel shared the prize with Hayek in 1974, he reserved his speech to advocate for the abolition of the prize. If Hayek was supposed to be the best an brightest in the field, then he wanted nothing to do with it. Nevertheless, the prize continues, despite the abyssal divide between what are arguably, ideological points of difference within the field itself. Which brings us back to the early 1970s and the intervention which Michel Aglietta was, arguably, attempting to make.

Fordism –or as the theoretical component was better known, Keynesianism—was obviously in crisis since both of the “cyclical” tendencies—stagnation and inflation—were happening at once; Althusser and others on the “New Left” were inspired both by world events and the appearance of any sort of crisis tendency in the capitalist system; and, perhaps more importantly, Hayek had just won the “Nobel prize in Economics” and Milton Friedman and the Chicago school were hard at work turning Pinochet’s Chile into a neo-liberal paradise. Finally, on a monetary level, abandoning the gold standard and replacing it with the “black gold” standard of recycled petrodollars was developing an extension of the financial markets and giving unprecedented control of world capital over to a “stratified oligopoly” of private banks. It was an important moment for economic science because, again, “history has infinitely more imagination than we do.” It was a moment when the flaws of the dominant economic model—and the theories that were supposed to explain it—were showing through. It was a good time to revert to a subversion strategy and, as a graduate student, Aglietta was in the sort of position Bourdieu recommends to make the heretical invention. But instead of saying anything too revolutionary, what he actually did was to begin by make an originally strong set of economic concepts into a set of symbolically legitimate equations: he rewrote the basic arguments of Capital, starting with one that Adam Smith himself would find it hard to contest.

As was said before, by Caporaso and Levine, the labor theory of value, a foundational concept in Marx’s Capital, had been disproven. Caporaso and Levine themselves, in their textbook which purports to explain economic theories, are unable to explain LTV without providing a neo-classical excuse for it. In the section supposedly devoted to the theories of Adam Smith, Ricardo, etc., they do not describe labor theory of value in any detail, but instead revert to the statement, “the theory runs into a number of analytical difficulties, which convinced modern economists working in the classical tradition to build a materialist basis for exchange by employing a distinct starting point also present in the classical theories: price of production”(47). They then go on to explain the changes to they make to equations of inputs and outputs (10t iron + 250 bu wheat + 100 hr labor…): “when labor enters as an input, it is really so much wheat, which went to produce the labor, and enters as an input through its product, the laboring capacity of the worker”(50).

Leaving aside the problems of all the naked, sickly, wheat-fed laborers sleeping on the factory floors and the ethical implications of this revolutionary new crop of wheat that evidently plows, plants, grows and harvests, mills and bakes itself, what is important is that Caporaso and Levine, while trying to present an overall balanced look at political economy, are unable to even consider the possibility that the Labor Theory of Value has any theoretical validity. Instead, it makes much more sense to think of things in terms of some monetary equivalent, the amount of which, in one way or another, “indicates the utility that the seeker recognizes in the materiality of the object sold or on offer” (Nadel, 29).

In other words, even though there have been many theorists in the tradition of Regulationist Political Economy, the dominant groups in the field of economics—especially anyone outside of France—namely the proponents of the neo-classical general equilibrium model taught in every ECON 101 classroom, did not want to acknowledge the possibility of an alternative model for the Labor Theory of Value, even to refute it: to do so would also be to consecrate it and admit that there was a legitimate challenge to the powerful agents and apparatuses, the Departments of Economic theory, all of which have a vested interest in keeping the current model functioning. Not only in terms of the field, which is largely based on these assumptions, but also of the market dominated society in which it operates and for which it provides a placating explanation. As Aglietta says, “If this theory has exercised such a dictatorship over economic thought, it is because it supplies a reassuring vision of society and a justification for the profession of economist”(10).

This, of course, brings us full circle to the central dialectical problem of the need for a simultaneous understanding of the culture of science and a science of culture. The former is something which Cultural Studies has done vigorously but not rigorously. The basic assumption was that one could simply understand scientific or even merely disciplinary claims as ideological cultural productions.

The project of cultural studies is an important one and the cultural significance of economic science is one of the most important ideological investigations we could undertake. There was a time when this type of discussion being engaged. Despite what Murdock and Golding have to say about the problem of “examining the economic base,” Stuart Hall, Raymond Williams and others began to present a system of concepts which attempted to illuminate the dynamic nature and role of culture—starting primarily in its very material nature. As Williams says in Marxism and Literature:

The insertion of economic determinations into cultural studies is of course the special contribution of Marxism, and there are times when its simple insertion is an evident advance. But in the end it can never be a simple insertion, since what is required, beyond the limiting formulas, is restoration of the whole social material process, and specifically of cultural production as social and material.(138)

Williams goes on to begin the project he continues in The Sociology of Culture in which the most basic task “is analysis of the interrelationships within this complex unity: a task distinct from reduced sociology of institutions, formations, and communication relationships and yet, as a sociology, radically distinct also from the analysis of isolated forms”(139). This loose set of concepts—as well as the many others he presents to describe cultural (as normally in the creative and/or artistic sense)—is developed with an eye to make the realm of cultural production describable so that the investigator could then position that process within the production relations.

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[Author’s aside. This is why I currently run four blogs and over the past decade have had multiple web pages. This log is for longer features, which is supplemented by my site at modblog for news over views of the current crisis state of capitalism and the resistance of capitalisms subjects. It is why my bloglines site has numerous news, activist and alternative news/blogs linked up to supplement my writings, to give an alternative to what is called consensus reality or the ruling ideas or the ruling class. To give readers more research links. And I can blow off some steam at that blog with my Devils Dictionary Redux.

And I have added a new blog this week; Heresiology-for the little heretic in each of us. This is for my other interests in cultural studies, the occult, esoterica, science, crypto science, and all aspects of popular culture, as the saying goes; all the news that doesn’t fit in these other blogs.]